Speaking on the publication, required under the EU’s revised fiscal governance framework, Minister Chambers indicated that the plan “reiterates that the Irish economy is in a reasonably healthy position”. At the same time, he highlighted that the underlying budgetary position is markedly less favourable than the headline balance meaning “further progress will need to be made regarding future structural challenges.”
Minister Chambers outlined how the new plans would evaluate expenditure growth from the base of all general government spending, both voted and non-voted. This will result in a higher growth in spending volume but a lower growth in percentage terms. Additionally, while Ireland’s calculations excluded specific spending plans for the Apple tax money and sale of AIB shares, the plan outlined the government’s three budgetary priorities. These are centred around the need to provide additional public services, financing additions to the public capital stock, and preparing for longer-term fiscal challenges.
In the report, the government has committed to grow spending until the end of the decade at a rate of 5% annually. This is interesting given that, following the announcement of Budget 2025, there was a net spending increase of 9.2% for 2024 and 5.8% for 2025. Ireland’s fiscal watchdog, IFAC, warned that by doing this, the government would be “repeating past mistakes” and adding approximately “€1,000 to the cost of a typical household’s yearly outgoings”. The report highlighted how business spending has been volatile in H1 2024, mostly due to highly concentrated machinery and equipment investment in the multinational sector, which is expected to make an adverse contribution in H2 2024.
As we approach the upcoming general election, it’s worth noting that when a new Irish government comes into office, it will have the opportunity to submit updated projections. While these may not significantly deviate from the current proposals, it’s a development that will be closely monitored by Vulcan Consulting for any implications of relevance.
